Accountancy: Basic Knowledge

By O P Mishra


 
















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Admission of a Partner: Capital Adjustment

By O P Mishra
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  CAPITAL ADJUSTMENT: ADMISSION OF A PARTNER At the time of admission of a partner, it may be agreed between the partners that the capitals of the partners may be adjusted as per agreement. The adjustment may take any of the following forms: Case l. Determination of Capital of New Partner on the basis of Old Partners' Capital. Case 2. Adjustment of old Partners' capital on the basis of New Partner's capital. Case 3. Total capital of Reconstituted Firm is given which is to be adjusted in New Ratio. Case 1: Determination of Capital of New Partner on the basis of old partners’ capital Sometimes, at the time of admission, the capital of the new partner is not given and expected to bring capital on the basis of capitals of old partners. There can be net) situations: IA. When the New Partner is required to bring Proportionate Capital. (In this case, Capital of Firm is calculated on the basis of total adjusted capital of old partners), 1B. When the New Partner has to ...
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Accounting Equation

By O P Mishra
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  https://www.blogger.com/blog/post/edit/8860325726841885571/4923302030264149705 Accounting Equation MEANING OF AN ACCOUNTING EOUAIION An Accounting Equation is a mathematical expression which shows that the Assets of a firm are equal to the sum of its liabilities and the capital contributed by the owner. Assets = Liabilities or Claims of Outsiders + Capital or Owner’s Equity OR Capital = Assets – Liabilities OR Liabilities = Assets - Capital The above relationship is known as the Accounting Equation or the Balance Sheet An Accounting Equation is based on the 'Dual Aspect Principle', which that every business transaction has two aspects, a debit and a credit of equal amount. In other words, for every debit, there is a credit of equal amount in one or more accounts and vice-versa. Example: Suppose Harsh starts a business by investing 5,00,000 in cash and takes loan of 1,00,000 from the bank. Now, the assets (cash) in the busines...
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Admission of a Partner: Revaluation A/c

By O P Mishra
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  Revaluation of Assets and Reassessment of Liabilities It is always desirable to ascertain whether the assets of the firm are shown in books at their current values. In case the assets are overstated or understated, these are revalued. Similarly, a reassessment of the liabilities is also done so that these are brought in the books at their correct and current values. For this purpose, the firm has to prepare the Revaluation Account. The gain or loss on revaluation of each asset and liability is transferred to this account and finally its balance is transferred to the capital accounts of the old partners in their old profit-sharing ratio.   In other words, the revaluation account is credited with increase in the value of each asset and decrease in its liabilities because it is a gain and is debited with decrease in the value of assets and increase in its liabilities is debited to revaluation account because it is a loss. Similarly unrecorded assets are credited and unrecorded ...
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